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 In the early 1960s, a young academic named Thomas Kuhn proposed a radical new theory on the nature of scientific progress. Kuhn's ideas contended that scientific progress is not a gradual, linear process. Instead, it is marked by periods of standard science interrupted by paradigm-shifting revolutions. In a similar nature, the internet has undergone several shifts, with the most recent being the transition to Web3. This revolution, encompassing a new decentralized internet, is reshaping the way we interact, transact, and build online communities. As all Web3⁴ projects gain traction, it becomes essential to develop new performance metrics that can adequately measure success in this rapidly changing landscape. Traditional metrics like page views or bounce rates will no longer suffice. Dr. Trent McConaghy, a computer scientist and expert in decentralized technologies, highlights the importance of measuring user participation and contribution to the network's growth. One key performance indicator (KPI) for Web3 projects is the number of active users within a given ecosystem. Active users are those who regularly engage in the platform's activities, such as making transactions, voting on proposals, or contributing to the project's development. Chris Dixon, a partner at venture capital firm Andreessen Horowitz, supports this notion, stating that "In the Web3 era, networks are defined by their users, and their value is proportional to the size and engagement of their user base".¹ Another KPI is the level of actual decentralization within a Web3 project. Decentralization can be measured in various ways, such as the distribution of token ownership or the number of nodes participating in the network. Dr. Emin Gün Sirer, a computer science professor at Cornell University and founder of the blockchain platform Ava Labs, emphasizes the importance of decentralization: "A truly decentralized network is more resilient, censorship-resistant, and better equipped to adapt to changing market conditions".² In addition to decentralization, token-based economic models are a crucial aspect of many Web3 projects. Total Value Locked (TVL) represents the total amount of capital committed to a project, such as staking tokens for network security or providing liquidity to decentralized exchanges. This makes TVL in a decentralized platform a vital metric for assessing a project's health. One broader KPI to be considered is Network effects. This phenomenon, by which a product or service gains additional value as more people use it, also plays a crucial role in the success of Web3 projects. Due to this, measuring the strength and growth of these effects is another vital area of research. As mentioned in an article by Chainlink, "Network effects play a critical role in the spread of ideas and the adoption of new technology, and are one of the key considerations underpinning the success of communication and value networks in Web3."³ Related: Harnessing the Power of the Ecosystem: How to Create a Network Effect Around Your New Metaverse Product Ultimately, measuring success in Web3 requires a rethinking of traditional KPIs and a deeper understanding of the unique characteristics of decentralized technologies. The decentralized internet revolution is still in its early stages, and the metrics we use today may evolve as the technology matures. Dr. Primavera De Filippi, a researcher at the National Center for Scientific Research (CNRS) in Paris, warns against over-reliance on a single set of metrics and encourages developing a nuanced understanding of each project's particular context and objectives. By focusing on active users, decentralization, total value locked, and network effects, stakeholders and developers alike can better evaluate the performance and long-term potential of their projects, fostering a more innovative and successful decentralized internet ecosystem. Glossary of Terms
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